Eclipse Systerms manufactures an optical switch that it uses in its final produc

Question

Eclipse Systerms manufactures an optical switch that it uses in its final product. The switch has the following manufacturing costs per unit: (Click the icon to view the costs.) Another company has offered to sell Eclipse Systems the switch for $20.00 per unit. If Eclipse Systems buys the switch from the outside supplier, the idle manufacturing facilities cannot be used for any other purpose, yet none of the fixed costs are avoidable Prepare an outsourcing analysis to determine whether Edlipse Systems should make or buy the switch. (For the Difference column, use a minus sign or parentheses only when the cost of outsourcing exceeds the cost of making the swithces in-house.) Data Table Make Outsource Difference optical switch optical switch (make outsource) Variable costs: Direct Material Direct Labor Variable Overhead Fixed Overhead Manufacturing Product Cost S 11.00 4.50 6.00 8.00 $ 29.50 Direct materials Direct labor Variable overhead Purchase price from outsider Total differential cost per unit

Explanation / Answer

Answer:

As given above Eclipse systems is able to save $1.5 per unit if it outsources. So, it is advisable that the company to outsource the switch.

Particulars Make Optical switch Outsource Optical switch Difference (Make - Outsource) Variable Cost Direct Material 11 Direct Labour 4.5 Variable Overheads 6 Purchase price from outsider 20 Total Differential cost per unit 21.5 20 1.5

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.